BEIJING/SHANGHAI (Reuters) – China’s central bank launched new funding programs on Friday to inject up to 800 billion yuan ($112.38 billion) into the stock market.
The People’s Bank of China (PBOC) detailed the new schemes aimed at promoting stable capital market growth, following a recent slowdown in market momentum.
After the announcement, the Shanghai Composite Index bounced back, closing up 4%.
Investor Wen Hao commented, “The wait is over,” and expects companies to utilize these programs to buy back shares, fueling a new bull market.
Recently, financial regulators met with major institutions, urging swift implementation of policies to support the economy.
The swap scheme allows brokerages and asset managers to borrow 500 billion yuan against assets to purchase stocks, with initial demand exceeding 200 billion yuan.
According to Xinhua Financial, this swap will help stabilize the market during downturns without forcing institutions to sell stocks at a loss.
Additionally, a relending program worth 300 billion yuan allows banks to lend to companies for share buybacks at a favorable interest rate of 1.75%.
Wen believes more companies will announce share buybacks using these low-interest loans.
($1 = 7.1189 Chinese yuan)
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